Make no small plans: Firm out to build city of 1 million

Urban India's infrastructure hasn't kept pace with the nation's booming economy. One company thinks it has a solution.

March 23, 2007|By Laurie Goering, Tribune foreign correspondent.

FAIZABAD, India — In this sleepy village two hours' drive from New Delhi, water buffalo laze in the town pond and sari-clad women negotiate the rutted earth streets carrying on their heads metal trays stacked with cow dung patties, a local fuel.

But Faizabad--like several dozen similar towns around it--is about to get a remarkable makeover.

Reliance Industries Ltd., one of India's largest private companies, is in the process of buying nearly 25,000 acres of wheat fields and small brick kilns around Faizabad with the intention of building a new Indian metropolis.

The planned city, 25 miles long and expected to draw a million residents within 10 years, will include a huge new duty-free industrial manufacturing zone, more than 2,000 acres of private housing, malls, schools, parks, hospitals, post offices, police stations, a PGA-caliber golf course, a monorail link to New Delhi, a Disney-style theme park, a massive power plant, an airport and much more--all privately planned and built with private funding, company officials say.

Reliance's main interest is developing an industrial park, in line with a national effort to create Chinese-style, duty-free "special economic zones" capable of attracting foreign investment, boosting exports and creating jobs. The company, which built its fortune with refineries and fiber-optic cable, earned $2billion in profit last year.

But in a nation where disastrous shortages of basic infrastructure--roads, power, water, airport capacity--are a major disincentive to investment, and where cities are struggling to accommodate tens of millions of rural migrants, building a whole new city just seemed to make sense, Reliance officials said.

"Rather than asking the government to develop infrastructure for us, we are offering to develop it for them," said Ajay Nijhawan, coordinator of the $25billion project, which Reliance hopes will rival successful duty-free zones in Shanghai, Dubai in the United Arab Emirates, Hong Kong and Singapore.

Such an effort might be expected to upset Faizabad's locals, who stand to see their wheat fields bulldozed into parking lots and shopping malls. Family attachments to land run deep in largely rural India, and government attempts to expropriate land for a similar industrial project in West Bengal state earlier this month left 14 dead after police opened fire on protesting farmers.

Faizabad's farmers, however, smile when a Reliance vehicle pulls into town. Rather than confront protesters, the company has offered farmers $50,000 an acre for their land, about 10 times the land's former value. That is $1 million for an average 20-acre rural plot.

"I'm very happy. I'm in favor of this," said Ramesh Sharma, 43, whose family is worth $2.4million after he and his two brothers turned over 48 acres to Reliance.

Using the cash, they have made huge investments in fixed-rate government bonds, bought 70 acres of land in a neighboring district, bought property in New Delhi and invested in two house plots and five stores in Jhajjar, a nearby town.

A brand-new white Tata Safari SUV is now parked next to the family's water buffalo pen, and a flashy green Suzuki Swift car sits by a pile of cut silage, sending neighborhood kids scattering in surprise when the car's alarm--an unusual noise in Faizabad--goes off.

`I feel rich,' farmer says

Even the poorest of Faizabad's farmers believe they're getting a good deal. Dayanand, 50, a subsistence farmer who goes by only one name, sold the 3 acres he farms with his two brothers for $150,000, enough to buy at least 6 acres elsewhere and a large truck to start a trucking business.

"If we waste this, things won't be better. But I feel rich," said the gap-toothed farmer, a smile crossing his creased face.

In nearby Jhajjar, the closest sizeable town to Faizabad, farmers who until recently owned only three sets of clothes went on a spending spree. But area officials say people have for the most part shown signs of using their newfound wealth well.

In a nation where heavy farmer indebtedness has led to suicides, growers in the Jhajjar region have paid off their loans and now are attending investment seminars run by Reliance, the Haryana state government and local banks, which have gotten $34 million in new deposits in the past five months, Nijhawan said.

Most farmers have opted to spend their cash on new land elsewhere, start businesses or put the money in government securities that, at 10 percent interest a year, could give them an annual income 20 times higher than they had made farming.

"This is bringing farmers into the mainstream," said Satyender Duhan, a state official who is effectively mayor of the Jhajjar region. "I'll never claim that everybody's happy, but the majority of people certainly are."